South Africa Economy
Key Facts and Insights
Cape Town CBD and Harbour
The South Africa economy is ruled by diversity. There are well-developed regions around the major industrial hubs and less-developed laid-back regions with slow economic growth. South Africa's metropolitan cities with modern infrastructure and well developed facilities stand in stark contrast with the sprawling townships on the cities' outskirts. When away from the South African economic centres or the usual tourist routes, you quickly will realise that South Africa is still a developing county, albeit with an enormous growth potential.
Cape Town harbour offers the biggest container port facilities in the Southern Hemisphere and a new terminal for ocean cruise liners is in the planning phase. Cape Town and Johannesburg and to a lesser extent Durban are the main economic centers in South Africa and the provinces Gauteng, Western Cape and KwaZulu-Natal contribute over 60% to the country's GDP.
South Africa Economy: Key Figures
- Population: 54,96 million (StatsSA estimate, 2016)
- GDP growth rate: 0.6% y/y (Q4 2015)
- Producer Price Index (PPI): 7.1% y/y (March 2016)
- Inflation Rate (CPI): 6.3% y/y (March 2016)
- Interest Rate (Repo Rate): 7% (May 2016)
- Unemployment Rate: 26.7% (Q1 2016)
- Manufacturing Sales Growth: 0% (April 2015) More info.
Read more about the South Africa economy in 2015 and view the graphic in larger size.
South Africa: Gateway to Africa
South Africa shares borders with Namibia, Botswana, Zimbabwe, Mozambique, Lesotho and Swaziland and acts as a safe and reliable transport hub with its major airports and seaports on the Southern African continent. South Africa is part of the BRICS nations (with Brazil, Russia, India and China) and belongs to the world's emerging markets.
The Gauteng province, with the provincial capital Johannesburg, and the Western Cape province, with the provincial capital Cape Town, are the most prosperous regions in South Africa and so many businesses prefer opening offices there to have easy access to the Southern African markets. Proximity to good transport networks and access to a well educated work force offer many opportunities for investors looking for excellent business potential in the Southern African region.
South Africa Economy: Key Sectors
- In 2016, South Africa's economy finds itself at the slowest point since the worldwide recession hit in 2009. In 2015, labour strikes, foremost in the mining sector, as well as power shortages have a negative impact on growth, which until then still showed minimal growth in several sectors. The rating agencies rank South Africa as negative, except Fitch who still rates as stable, but should the scarce water supply, the political climate and the continued low resources prices continue to dampen the investment climate, a further downgrade will possibly not be avoided. The economy is expected to expand only by 1,0% and might not even reach the target of 3% by 2018.
- South Africa has plenty of natural resources: Gold, platinum, chromium, iron ore and diamonds are among the biggest resources. With world-class processing facilities and the introduction of new technologies such as the coal-to-liquid facilities, South Africa is considered by many a world leader in the mining industry.
- The finance sector as the largest industry sector in South Africa contributed 21% to the country's GDP in 2015. The mining sector reported the highest growth of the ten industries. The foreign direct investment in mining constitutes about 15-25% of FDI in the country. However, the growth in the platinum group metals has been contributed to the increased productivity after the strikes in 2014 when the mining sector had reported a negative growth of 48%. A year-on year increase in the platinum metals group sector of 46,2% had been noted in 2015.
- Manufacturing, the chemical industry and agriculture are other important sectors. The country ranks in the Top 25 countries regarding the chemical industry and South Africa plays an important part in the manufacturing business sector, especially the automotive industry. Many of the international car manufacturers have production lines set up in the country.
- South Africa is the African leader in the information and communication technology (ICT) sector and growing as a hub for IT specialists and the country is among the 20 biggest consumers worldwide in computer and IT services.
- Other main business sectors are the finance and the real estate sectors, the service industry and the tourism industry. Tourism is one of the major growth industries contributing about 9.4% to the GDP (2014) and counting more than 14 million tourist arrivals in South Africa. New immigration regulations affecting the tourism sector, as described here, affected these figures negatively. Also the fear in regards to the spread of the Ebola virus in Western Africa, hit the tourism sector in Southern Africa. There has not been an Ebola death in South Africa.
South Africa Economy: Trade Partners
South Africa's biggest trade partners in 2015 are:
Imports: China, Germany, Saudi Arabia, USA, Nigeria, India
Exports: China, USA, Japan, Botswana, Germany, Namibia, India
Economic Prospects for 2016/2017
With high unemployment rates and insecurities in the commodities sector, the growth rates in most economies around the world are marginal. China especially registers an economic slowdown and less growth than anticipated is expected there; this impacts the South African economy as well. Although the South African financial system is rated as one of the more stable financial systems worldwide, the credit rating by Moody's has been lowered, in 2016 it still ranks Baa2, which is the second lowest investment grade does not install as much confidence into the ailing economy.
South Africa experiences a skills shortage in many employment sectors which impacts the development of the South Africa economy. The high average unemployment figures of over 26% (and a youth unemployment rate of about 50%), also are to consider and development of the education and training sector is considered as crucial. The energy sector is experiencing some strain and the limited output affects all business areas. However, with the development of new plants and alternative energy resources, such as harvesting concentrated solar power in the Northern Cape, the energy sector is expected to recover over the coming years. The economic growth is anticipated to range in the region of 1% for the year and through various measures the inflation rate is expected to be kept in control however, it is above the recommended 3 - 6% range.
The recurring strikes in the public sector and the student unrest and upcoming municipal elections this August, as well as the ailing energy sector are considered the main influences which dampen the growth potential for this year. However, as the leading emerging market destinations in Africa, with Nigeria, the country will remain the major economic driver in Southern Africa and will remain the favourite destination for investment in the region.
ExpatCapeTown Business Guide
Go to our Business Guide
To get more insights and basic facts about doing business with South Africa read the specific pages in our guides on various topics:
Need more insights into the Economy and Doing Business in South Africa?
Further Useful Resources
If you are looking for resources on the South Africa economy, please refer to these sites:
Image Credits for South Africa Economy: Shutterstock.com and own images
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